After skyrocketing, Bitcoin stands out and shows its face, successfully breaking through 60,000 US dollars and reaching a maximum of 64,000 US dollars (Binance data). It is only a 7.2% increase away from the historical high of 69,000 US dollars. It can be said that there is only a layer of window paper. distance. Bitcoin’s current market capitalization ratio has also successfully reached 53%, reaching the highest value since the end of the bull market in 2021.
However, this does not have much to do with most retail investors, because most retail investors are now full of altcoins. Of course, my position is also allocated a large amount of altcoins. However, the current performance of altcoins is: following the decline but not the rise. After Bitcoin rises, when it coughs, the altcoins will catch a severe cold! Therefore, the only question we are most concerned about now is: How far is the explosion of altcoins?
Today we will talk about this issue from the indicator of "Bitcoin's market capitalization ratio".
Bitcoin’s market capitalization ratio, also known as Bitcoin dominance or Bitcoin Dominance, refers to the ratio of Bitcoin’s market capitalization to the total market capitalization of the entire cryptocurrency market. This indicator can be used to analyze Bitcoin’s strength or weakness relative to the overall crypto market, as well as determine changes in market sentiment.
Generally speaking, in a bull market, Bitcoin's market capitalization ratio is low, and in a bear market, Bitcoin's market capitalization ratio is relatively high. However, in terms of changes, as the bear market gradually turns into a bull market, or in other words, when a bull market is coming, Bitcoin's market capitalization ratio will gradually increase. High, which means Bitcoin rises first and outshines others, as is the case now.
According to data from CoinMarketCap, in November 2022, Bitcoin's market value dropped to 37.8%, reaching its lowest value, and then rose all the way. In October last year, it successfully exceeded the 50% mark and rose to the current 53%.
Judging from the progress of the last halving bull market, the last Bitcoin halving (May 12, 2020), 7 months later, in January 2021, Bitcoin’s market value accounted for the highest 69%. At that time The market trend is that Bitcoin broke the highest point of the last bull market, and then detonated the market, altcoins exploded, and the market value of Bitcoin began to gradually decrease.
Historically, the changes in BTC's market capitalization ratio can be divided into three stages. The first stage was before 2017, when BTC's market capitalization ratio remained above 80%; the second stage was from 2017 to 2021, and since the second round of 2017 After the halving bull market, many new currencies emerged one after another, and the situation of high concentration of funds in BTC changed. In May 2017, the market value of Bitcoin fell below 50% for the first time;
The third stage is from 2021 to October last year, and BTC’s market capitalization ratio has stabilized between 40-50%; it is currently entering the fourth stage, which can also be said to be a continuation of the third stage. With the blessing of the adoption of spot ETFs, Bitcoin It has been soaring all the way, accounting for more than 50% again, paving the way for the fourth round of halving. As shown below:
From the data mentioned above, we can see the relationship between Bitcoin’s market capitalization share and the bull market in the crypto market: In the early stages of a cryptocurrency bull market, Bitcoin’s market capitalization share usually declines. This is because investors are confident in the overall market and are willing to put money into riskier altcoins in search of higher returns.
When Bitcoin’s share of market capitalization declines, it usually means that money is flowing from Bitcoin to other cryptocurrencies, which can be a signal of a broader rise in the market, that is, the beginning of a bull market. However, in the later stages of a bull market, and in the early stages of a bull market after a bear market, Bitcoin's market capitalization share may rise again, because when there is a market correction or uncertainty increases, investors may transfer funds back to the relative safety of Bitcoin. .
At present, the proportion of Bitcoin's market capitalization continues to rise. Only when the proportion begins to continue to decline, it means that market sentiment is becoming optimistic and investors are seeking higher-risk investment opportunities. This may herald the beginning of a bull market. . So now is not the time for altcoins to explode. We can also support this judgment from the copycat season index, as shown below:
In general, Bitcoin market capitalization ratio is an important indicator for analyzing cryptocurrency market trends, but it should not be the only indicator to refer to. You can consider a variety of factors and keep a close eye on market dynamics.
From the perspective of the market as a whole, Bitcoin will continue to be strong at present, and its market capitalization ratio may eventually exceed 60%. Then altcoins will explode, and Bitcoin's ratio will gradually adjust.
Now from the perspective of the overall environment, although after the adoption of spot ETF, tens of billions of dollars of old money from the traditional market flowed into the currency circle, but on the one hand, this money mainly flowed into Bitcoin, and was locked in Bitcoin and rarely flowed out; on the other hand, the money was locked in Bitcoin and rarely flowed out; On the one hand, the interest rate hike cycle of the Federal Reserve has resulted in insufficient old money in the traditional market itself, so the amount of money flowing into the currency circle or Bitcoin will not be too high.
Judging from the time point, as previously tweeted, Bitcoin will be halved around April 28 this year. Before that, only some popular or strong currencies will explode in turn, and the degree of explosion will be very low. Doubling, three to five times is a very good performance, because the size of the pond will produce the size of the fish. After the halving, Bitcoin will continue to be strong for 3-6 months, that is, around September and October, Bitcoin will have almost risen, funds will overflow, and altcoins will explode accordingly. If the Fed happens to be there by then If the interest rate cut is also confirmed, then the season of altcoins, the altcoin season, will come completely, and we will see and participate in the birth of the "myth" of 10 times, 100 times, or even 10,000 times.
